Author Question: Which of the following statements is true of creative destruction? A) Creative destruction is ... (Read 76 times)

cool · **on:** Jun 30, 2018

Which of the following statements is true of creative destruction?

A) Creative destruction is encouraged in economies with extractive institutions.
B) Creative destruction is a phenomenon that was mostly prevalent before the year 1800.
C) Creative destruction is generally bad for an economy.
D) Creative destruction creates losses for some economic agents and benefits for others.

Question 2

Polonia produces two goods - X and Y. The quantity produced of the two goods and their prices in two different years are given in the table below:

Year Good X Price Good X Quantity Good Y Price Good Y Quantity
1 10 100 12 250
2 25 120 22 300

i) Calculate the real GDP of Polonia in Year 2 taking Year 1 as the base year.
ii) What is the growth rate of Polonia's real GDP between Year 1 and Year 2?

dreamfighter72 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

i) Real GDP is the total value of a country's output using base year prices. In this case, the base year is Year 1. Therefore, real GDP of Polonia in Year 2 is 120 10 + 300 12 = 1,200 + 3,600 = 4,800.
ii) Polonia's real GDP for Year 1 is 100 10 + 250 12 = 1,000 + 3,000 = 4,000 and for Year 2 is 4,800. The growth rate of Polonia's GDP is (4,800 - 4,000)/4,000 = 0.2 or 20.